Who’s In Your Space? The Competitive Analysis [Business Plan Basics #4]
Business Plan Basics Part 4 focuses on how to write up a Competitive Analysis for inclusion in your business plan for your big business idea. The Competitive Analysis comes on the heals of the strong foundation we’ve set up through the Business Description, Industry Analysis, and Market Description.
The Competitive Analysis shares some traits with your Industry Analysis, but it gives you a chance to go into more detail about who your primary competitors are and how you differentiate yourself from them.
It’s important because people looking to potentially give you seed money to launch your business are going to want to know how and why your idea will be successful based on what’s already happening in the market.
Here’s what you’ll want to include as part of your Competitive Analysis:
Your Main Competition
Here’s the place to provide a detailed list of your competitors, which basically means businesses who are offering the same products or services as you’re planning to offer.
If there are a ton of businesses doing the same thing, you don’t have to include them all … stick with the biggies. And if there aren’t many, you can widen your list to include companies that are indirect competition – meaning, they’re not doing the exact same thing, but they’re still going to compete for the business of your audience. Once you have your list, highlight the 3-5 businesses you see as your most serious competition.
Product or Service Breakdown of Your Main Competition
Break down the different products or services your competition offers. What are their most popular offerings? Who buys these offerings? How do your target customers view the competition? Where do your competitors sell or advertise their products? The more detail here, the better. Do online searches, ask around, or even do a survey (you can do them free on Facebook or through Survey Monkey) to get fresh insight.
Competitor Pros & Cons
To give potential investors a sense of how your idea fits into the market, lay out the strengths and weaknesses of your competitors. Where do they struggle? What aspects do they need to improve? And likewise, what are they really good at? In what aspects are they considered the experts?
What specific advertising or marketing strategies do your competitors use? Do they create ridiculous YouTube videos that go viral? Does the bulk of their business come from referrals from past customers? Name any core strategies you can uncover about the way your competition goes about running their business. If the competitor is big enough, check out their press releases or annual reports for all kinds of valuable information on how they do what they do.
The State of the Market
This is where you go into detail about the potential for your idea, both in the present and in the future. Are you on the cutting edge of the latest in technological gadgetry? Show the reader how. Does your idea fit into a market that is experiencing a big boom and is expected to grow in the coming years? Write about it. One of the most important things you want readers of your business proposal to take away is that your idea is a strong one right now and that the potential customer base is solid and, better yet, growing.
For help getting started on info gathering for your Competitive Analysis, fill out the Like a Boss Competitive Analysis Worksheet. Then take your answers and write out 1-2 pages to insert into your Business Plan.